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Social Security to Go Paperless in 2013

The U.S. Treasury will stop mailing paper checks to Social Security beneficiaries on March 1, 2013. All federal benefit recipients will then receive their payments by direct deposit to a bank or credit union account or loaded onto a Direct Express Debit MasterCard.

Most Social Security and Supplemental Security Income payments (about 90 percent) are already distributed electronically. People who newly applied for federal benefits on May 1, 2011 or later had to choose between direct deposit and debit card payments, and did not have the option to claim paper checks.

"As this deadline approaches, we're urging the remaining 10 percent of federal benefit recipients who still receive a paper check to make the switch to electronic payments as soon as possible," says Treasurer of the United States Rosie Rios. "The switch to electronic payments is a win-win for federal benefit recipients and for taxpayers. It provides a safer, more secure, more convenient way for Americans to access their federal benefits, while also improving government efficiency and delivering more than $1 billion in savings."

The Treasury Department says the switch to electronic payments for Social Security, Supplemental Security Income, Veterans Affairs, Railroad Retirement Board, and Office of Personnel Management payments will save taxpayers $1 billion over 10 years. "It costs us about a dollar to issue a paper check and about 10 cents to offer an electronic payment," says Walt Henderson, director of the electronic fund transfer strategy division at the Treasury Department. Direct deposit also allows benefit recipients to receive their money faster, and eliminates the risk of lost and stolen checks. "Each year, almost half a million Social Security checks are reported lost or stolen, and the easiest way to avoid that is direct deposit," says Social Security Commissioner Michael Astrue.

California, Texas, and New York residents receive the most paper checks. Texas benefit recipients received 441,347 paper checks in January 2012. Once these Texas retirees switch to electronic payments it is expected to save the federal government $4.9 million. When California residents go paperless the Treasury expects to save $5.9 million.

People who do not choose an electronic payment option by March 1, 2013 will then begin receiving their payments via the Direct Express card. The Treasury Department introduced this debit card payment option in 2008, which allows Social Security recipients to make purchases at retail locations and receive cash back with purchases.

However, the debit card also charges a variety of fees. For example, only one free ATM withdrawal is allowed with each deposit to your card account. After that, retirees are charged 90 cents for each withdrawal. Seniors must also pay 75 cents each month if they request paper statements and $1.50 for each fund transfer to a bank account. This isn't a great card to use when traveling abroad because ATM withdrawals outside the U.S. cost $3 plus 3 percent of the amount withdrawn, and debit card purchases overseas cost 3 percent of the purchase amount. "The Direct Express pre-paid card is specifically designed for unbanked federal benefit recipients," says Henderson. "If a person already has a bank account we make it really easy for them to sign up for direct deposit."

Retirees currently receiving paper checks will receive information about switching to electronic payments with their March 2012 payment. Federal benefit recipients can switch to electronic payments at godirect.org or by calling 1-800-333-1795. To sign up for electronic payments you will need to know your Social Security number, your 12-digit federal benefit check number, and the amount of your most recent federal benefit check. You will also need your financial institution's routing number and account number to sign up for direct deposit.